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U.S. small-cap stocks are not usually the smartest pick for investors. They look especially dangerous now, says DataTrek

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Investors are still parking capital in large-cap stocks — and it’s not just because of higher interest rates

The U.S. stock market’s summer rally has faded away in the past few months as rising Treasury yields pushed down large-cap stocks — but their smaller counterparts have suffered far worse.

Both the Russell 2000 and S&P Small Cap 600 index SML Monday hit their lowest levels since September 30, 2022. In contrast, the large-cap benchmark S&P 500 finished 15.6% above its 52-week low of 3,647.42 on Monday, according to FactSet data. Meanwhile, large-caps have a much higher weighting in technology stocks, which have driven almost all of the gains in the U.S. stock market this year. However, the large-cap index has a “notably lower weighting” in financials, which has underperformed the overall market in 2023 as higher interest rates have introduced significant stress into the U.S. banking system, Colas said.

 

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